How Long-term Goals Affect Cashflow

There are so many things to think about when starting a business, so much so that the plan of what to do with it when you have had enough is often overlooked, if it’s even been thought about.  This is very natural, after all, when you set the business up the excitement, adrenaline and focus are very much on what to do to get it off the ground and turning a profit.  Who really wants to think about the end-game?

Many an advisor will ask the question, but rarely do they push too hard to have an answer, after-all, it’s future’s problem.

But is it?

To be able to make many of today’s decisions we need to know what the plan for the future is.  We need to know what our goals are.  Is your ultimate goal to build a strong, successful business which can be handed over to the next generation?  Are you keen on leaving a legacy, something for future generations to pick up and run with?  This might not do it for you.  You may be more focussed on the here and now and building your personal wealth as quickly as possible.  Perhaps you sit a little in both camps.

It also doesn’t need to be set in stone but having some kind of idea of where you are headed with your business does give you the ability to make strong clear decisions about the future here in the present. 

Starting with the end in mind is a key phrase of many an advisor.  When I was a youngster cutting my teeth and learning my craft, it manifested as a way of creating the structure necessary to help the business best achieve it’s goals.  Was a company, trust or joint venture the way to go.  I was dealing with mining clients in those days and often a straight company structure was the favoured option as it allowed for future sale and could be wound-up relatively easily if need be. 

Now, whilst this decision will very often change (and perhaps change frequently), having a rough idea of the end point does help to drive key decisions from the overall business structure to key strategies along the way such as those for expansion or whether to take on another employee.

It also becomes important when preparing your annual budget (which should be done no matter what) helping you to make short-term decisions in the comfort that they align with the overall long term goals.

As an example, for me the ultimate decision around my future plans for the business varies – usually depending on external factors.  During good periods, when I remember why I joined the accounting profession, I would like to hold onto the business, perhaps one day become it’s Chairperson while others do the day-to-day, allow another generation of accountants to come through and try their hand at relationship building. 

At other times, I want to sell out as soon as I am able – these thoughts generally coincide with yet another regulatory change requiring more onerous challenges to our work, meaning less time to spend on client work and more cost to the business which we are usually faced with absorbing rather than being able to pass on.  And generally speaking making our lives a lot harder.

Whilst my overall goals change, one thing remains clear – I would like to use the business to build personal wealth.  So I’m in the “little of column A and column B” camp.  This makes some decisions really easy.  Decisions such as how much to increase fees by (always enough to turn a profit, pay everybody a good salary, pay our bills and pay me a fair salary), whether to buy a new printer (or can we manage on the current one for a little longer), does the rent increase we have just received seem fair and feasible etc etc etc.

Inadvertently it affects longer-term decisions such as whether or not to buy a new book of clients to grow the business.  Instead, I may elect to grow the business organically, through client retention, increased services, upselling and new clients rather than going through the cost and rigour of buying a new book.

If you know at the outset what you want long term then fabulous, it really does make everything easier along the way.  The only advice here would be – be open to change should it confront you.  But if like me, you aren’t 100% sure what you want to do long term, then you when do you need to have made the decision by? 

There is no set timeframe.  And you may find it easier to think in 5-year blocks.  What do you want out of your business over the next 5 years?  This question can be repeated each year and before you know it, not only have you achieved your goals but 10 years may have passed, by which stage, you might have a clearer view of where you want to be going in the future.  In other words, you buy yourself some time whilst at the same time, creating a solid plan.

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